Almost three-quarters of financial services chief executives believe technology is a key enabler of innovation, according to the Financial Service Council's CEO Survey.
The report found that 73 per cent of financial services CEOs believe technology is a key enabler to deliver innovation in financial services and 62 per cent believe technology plays a major role in strategic planning.
Top innovation projects identified by CEOs include developing new ways of servicing customers, developing new products and developing new internal back-office processes.
DST Bluedoor chief executive, Martin Spedding, said the changing operational environment and client demands in financial services were driving firms to innovate and implement technology to develop new products and improve customer service.
"Technology innovations such as implementing mobile applications or Web portals and improving internal and back-office processes are essential to better communicate with customers and help firms to maintain or lift market share," he said.
However, despite technology playing a major role in developing innovation within the financial services sector, 55 per cent of Australian chief executive are spending IT budgets on Business As Usual projects as they struggle to comply with regulatory changes.
The survey found that more than 50 per cent of those interviewed were spending less than 25 per cent of their IT budgets on innovation projects, while 31 per cent were spending between 26-50 per cent.
As few as 14 per cent were devoting over 50 per cent to innovation-focused activity.
While many CEOs said they wish they had more resources to direct to innovation projects, nearly three quarters (73 per cent) believe their technology spend represented value for money, and over half thought their IT spend was about right.
Spedding said the continuing need for financial services firms to address regulatory requirements is leaving Australian businesses in a difficult position.
"Many CEOs wish they had more resources to direct to innovative projects to ensure future growth and market efficiencies, but ongoing regulatory changes are absorbing crucial IT spend."
Looking ahead, the survey revealed 75 per cent of chief executives believe the use of client data will improve products, increase customer service and contribute to strategic thinking.
Financial Services Council chief executive, John Brogden, said consumers were driving new developments in technology which would play an important role in the future of financial services.
"Technology will be critical for delivering new products and processes and in helping businesses better understand customer behaviours and goals," he said.
"The challenge for financial services will be to keep abreast of customer needs."
The Financial Services Council conducts an annual survey of its member CEOs on the key issues affecting their businesses, the financial services sector more broadly, and the Australian economy.
This year's survey focused on the place and importance of innovation in meeting Australia's changing regulatory environment. Fifty of the FSC's 73 member CEOs participated in the survey.